European Shares Lower At Midday On Debt Fears

4/18/2012 7:20 AM ET

European shares lost ground on Wednesday after a report released by the Bank of Spain showed that bad loan ratio at Spanish banks rose to 8.16 percent of the total loans held by banks in February, marking the highest recorded since May 1994. The report accentuated concerns over the nation's fiscal outlook ahead of two- and 10-year bond auctions on Thursday.

Growth concerns also returned to the fore after data showed that construction output in the euro area decreased for the third month in a row in February.

According to data released by statistical office Eurostat, construction output decreased a seasonally adjusted 7.1 percent on a monthly basis in February, contrasting with 0.5 percent growth in January. Construction output in Germany plunged 17.1 percent month-over-month, while output in France edged down 0.4 percent. The output of the Italian construction sector fell by 9.9 percent.

The Euro Stoxx 50 index of eurozone bluechip stocks is losing 1.16 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, is edging down 0.14 percent. Across Europe, the German DAX is moving down 0.56 percent, France's CAC 40 is losing 1.44 percent, the U.K.'s FTSE 100 is declining 0.24 percent and Switzerland's SMI is down 0.38 percent.

SGL Carbon is tumbling 3.7 percent in Frankfurt after the German carbon fiber maker said it would issue convertible notes to fund the company's expansion in Portugal and China. Volkswagen is posting a modest 0.1 percent gain on a Bloomberg report that it will announce plans for a new factory and other projects in China on April 23.

Shares of BHP Billiton are rising 1.6 percent in London after reporting a 14 percent rise in iron ore production in the third-quarter. Tesco Plc is up 0.4 percent after the retailer unveiled a £1billion revival plan.

Accor SA is down 0.2 percent in Paris after the French hotel group reported a 4.5 percent increase in revenues for the first quarter on a like-for-like basis.

Elsewhere, Asian shares rose across the board as a stronger-than-expected reading on German ZEW investor sentiment index and a successful Spanish sovereign debt auction soothed worries over Europe's debt crisis. Strong U.S. corporate earnings and an improved IMF forecast for global growth also improved appetite for riskier assets.

Commodities are subdued and trading in the U.S. index futures point to a weak opening on Wall Street.

After moving briefly sideways in Asian trading, the U.S. dollar resumed its rally against the euro as French President Nicolas Sarkozy said that the euro's exchange rate against the dollar must be discussed with the European Central Bank.

Sarkozy, who is seeking a second presidential term, told the local television channel BFM TV that euro is too expensive and a stronger euro hurts exporters as they would be less competitive. "These are debates that we must have with the ECB Governor," he reportedly said.

On the macroeconomic front, Bank of England Deputy Governor Paul Tucker today said inflation remains uncomfortably above target. Speaking to the Association of Corporate Treasurers in Liverpool, Tucker said inflation will stay above 3 percent throughout the second quarter of this year, and possibly into the second half of the year.

Earlier in the day, the minutes of the April monetary policy meeting of the Bank of England showed that the monetary policy committee decided to maintain the size of the asset purchase program at GBP 325 billion through a split vote as one member called for an increase in stimulus.

In economic releases, jobless claims in the U.K. rose weaker than expected in March, the latest figures from the Office for National Statistics showed. The claimant count in March was 1.61 million, up 3,600 compared to the previous month. Economists expected an increase of 6,000. The claimant count rate was 4.9 percent, unchanged from the previous month.